Credit markets with uneven information often use credit rationing to maximize profits. Informal credit markets can help reduce the cost of credit rationing by separating high-risk and low-risk firms. However, even with this improvement, capital accumulation is still lower compared to incentive-based market rates. Incentive mechanisms allow banks to diversify risk by identifying each firm's risk level, leading to higher capital accumulation in the long run. Self-revelation of firms' types through incentives significantly improves welfare, as seen in consumption equivalence.